How dreams of logistics startups turned to dust

Ankit Singh, ex co-founder of Truckmandi, a startup connecting logistics providers with customers for inter-city trucking services now works with Ola. Aravind Sanka of TheKarrier has moved on to start a two-wheeler ride hailing App Rapido. They are part of a bunch of entrepreneurs who had big dreams to revolutionise the Indian logistics sector but have retired hurt.

The buzz which consumed techies, industry heirs and college friends to unite over a logistics startup in India is fading. 2016 marked a dry spell for startups, especially those related to offering tech solutions in logistics.

Atleast six startups, namely, TheKarrier, Truckmandi, Trucksumo, Loadkhoj, Zaicus and Sastabhada, all dealing with truck aggregating for intra as well as inter-city transport have pulled the plug on their operations. The challenges are many and it majorly boils down to the fragmentation of the Indian logistics sector and the inability of technology alone to resolve the brick and mortar business.

“One of the major problems was that it was a credit-driven business which made it difficult for us to scale up. It was extremely challenging for us to fund 35-40 days’ credit. Another external factor was the dull market performance in the end of 2015,” said Ankit Singh, ex-founder of Truckmandi. The startup connected logistics providers with customers for inter-city trucking services and went belly up in June, 2016.

Since most of these startups seek to capitalise on the on-demand element for trucks, time becomes an integral player and in the case of intra-city logistics that comprise mostly mini trucks for businesses and individuals, an acceptable delay does not bode well.

“The pain-point of requiring the truck on demand is not very pronounced and that posed a huge challenge,” Aravind Sanka, ex co-founder, TheKarrier said. The Bengaluru-based startup working in the intra-city space last went live in October, 2016.

Since the advent of Ola and Uber in the Indian startup marketplace, aspiring entrepreneurs have all found technology aggregation attractive to add to their business models and catch investors’ attention. But the number of such startups shutting shops suggests that that is not enough.

“A number of such startups failed because they did not take a full stack view of the Indian logistics sector. Just adding a thin layer of technology does not solve the deep routed problems such as nonavailability of drivers and fragmented truck ownership. We are very bullish about investing in logistics sector in the future but we’ll look at companies that have a full-stack view before they venture,” Mukul Arora, managing director, SAIF Partners said.

The venture capital fund invested in tech-enabled logistics firm Rivigo that raised $30 million from SAIF in a series B round and $75 million in a series C funding led by an affiliate of Warburg Pincus. The inadequacy of technology is not the only reason for these firms to go down under. The logistics sector of India is a sprawling one that is plagued by a number of issues and the shippers’ and fleet owners’ woes are somewhat conflicting. While a shipper struggles to deal with high freight rates when benchmarked against global standards and non transparency of transactions, bill reconciliation with clients and idling of vehicles without load are issues that haunt a fleet owner. And seldom has a startup been able to address both parties’ woes in a balanced way.

“These apps are trying to create a disruption in the minds of the clients and they are using price to do that. I’m sure that some of these apps are great but I have not embraced them because the kind of quality I seek to deliver including dealing with the related stakeholders across five states for a long journey like that, deserves a premium,” Aditya Agarwal, director, Hari Om Freight Carriers, Kolkata, said.

India spends around 14.4% of its GDP on logistics compared to less than 8% spent by other developing countries. Logistics market in India is expected to be worth $307 billion by 2020 and the unorganised nature of the sector opens up a huge scope for disruption, according to industry experts.

While a bunch of startups did go off-track in their endeavour, there are others like Rivigo and Tiger Global backed-Blackbuck that have stood the test of time and retain investors’ interest. With cashless being hailed as the way to go after demonetisation, there are hopes that it will add to the streamlining of the sector.

“2017 is set to be a landmark year for logistics in India. With the introduction of GST and a major push towards a digital, cashless economy, we can expect significant buzz and traction for technology enabled logistics startups. However, we do believe that while the opportunity is huge, only a handful of very resilient companies that are creating real value in the market will survive the year going into 2018,” Raghav Himatsingka, founder and CEO, Truckola, said.

The Mumbai based intercity/interstate FTL transport provider posted a 23% month on month revenue growth in December 2016, post demonetisation, on the back of cashless transaction tools like FASTags and diesel cards that resulted in significant savings on capital expenses for truck owners associated with its platform.